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(Proactive Investors Australia) Danakali well-funded to continue execution phase at Colluli Potash Project

Posted by: Semere Asmelash

Date: Friday, 27 April 2018

Danakali well-funded to continue execution phase at Colluli Potash Project

27 Apr 2018   John Miller

The company had $16.4 million cash at the end of the March quarter after raising $3.8 million through exercising options.
A healthy crop
The Colluli Potash Project in Eritrea will help feed the fertiliser industry

Danakali Ltd (ASX:DNK) is well-funded to continue the execution phase of the Colluli Potash Project in Eritrea with $16.4 million in cash as at March 31, 2018.

The healthy cash balance was boosted during the March quarter with $3.8 million raised through the exercise of 11.1 million options.

After completing the study phase, Danakali is focused on offtake, funding, operational contracts, operational readiness and corporate social responsibility.

READ: Danakali’s advanced potash project is a cut above the rest

The project is owned by the Colluli Mining Share Company (CMSC), a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).

During the current quarter, CMSC intends to announce a preferred engineering, procurement, construction and management (EPCM) contractor to manage the project.

A number of EPCM bids were received during the March quarter.

EPCM bids evaluated

These have been reviewed and evaluated for technical and commercial viability and cost competitiveness in consultation with project management consultant Turner & Townsend.

Negotiations with the preferred EPCM contractor have taken place and management expects to seek board approval this quarter.

Mining will be conducted by mining contractors using conventional methods and mechanised equipment, including surface miners, excavators, bulldozers and haul trucks.

Negotiations with the two shortlisted mining contractors have started, supported by Danakali’s mining consultant, AMC.

Power provision negotiations

Final contract conditions for power provision are nearing completion.

This will follow a Build Own Operate Transfer model, which diversifies project risk by utilising the experience of proven operators.

Danakali continues to liaise with the Ministry of Energy and Mines and the Ministry of Land, Water and Environment on the social and environmental management plans.

An impression of the proposed plant at Colluli.

The company is also progressing its offtake strategy and is working with several offtakers who continue to express strong interest in securing granular and standard sulphate of phosphate product.

READ: Danakali major shareholder increases interest through option exercise

Debt funding was initiated in the March quarter through the provision of a Debt Information Memorandum (IM) to potential financiers.

The IM provides detailed project related information and seeks non-binding expressions of interest from potential financiers.

Danakali expects receipt of non-binding expressions of interest in the current quarter.

Activities this quarter

Key activities planned for June quarter include:

▪ Advance bankable offtake agreements and associated approvals

▪ Selection of the preferred EPCM contractor

▪ Finalise negotiations and advance the contract terms with shortlisted mining contractors

▪ Finalise contract terms for preferred power provider ISI

▪ Continue due diligence process for debt project financing

▪ Materially complete the dual listing on the London Stock Exchange

Danakali well-funded to continue execution phase at Colluli Potash ...

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